Delta Market Update - September 2017

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Written by Charles C. Smith, Jr., Chairman

Published: 26 September 2017

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A September Overview

The global markets stalled during the latter part of the summer, but have now reclaimed their footing. We are continuing to get confirmation of a global economic recovery and the markets outside of the US have continued to lead us higher. This is in drastic contrast to what we have experienced in the last five years, as the US market has pulled everyone else higher. But, we believe it’s also a healthy trend as most non-US markets now trade at a pretty heavy discount to the US.

There are a few trends we think bare watching as we move forward.

Do we experience technical extremes? – One of the reasons we feel this rally has legs is because we continue to see strong technical internals. Typically, you would see the internal indicators of the market begin to deteriorate 6-9 months before a top. We have not seen that yet.

Will volatility pick up? – One of the indexes we follow closely is called the VIX. It’s a volatility indicator and it tells us how much variance we are experiencing in the markets. Today, the VIX is hitting all-time lows and we have to wonder how long that can last. In reality, the VIX is a better indicator of where/when intermediate-term corrections may come into place. But, it is useful on a short-term basis.

The markets are trending higher right now and we feel there is global economic justification as to why. But, we are starting to get some short-term extremes coming into play. So, we have a raised eyebrow as to how far we run? We are encouraged by the global economy, but as always, we will not throw caution to the wind and will continue to monitor the markets for warning signs.

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